#Drawdown pensions how to
#Drawdown pensions upgrade

This might involve using an expression of wish form. The next move is to give up-to-date details of the nominated beneficiaries of your pension fund to your provider.

#Drawdown pensions upgrade

“You may need to upgrade to a more modern pension that does,” she adds, although this can cause problems: “Valuable guarantees sometimes apply to older pensions.” Second, as Julie Hutchison at Standard Life advises: “Check if your pension plan allows you to pass on your savings in a tax-efficient way.” Older styles of pension schemes may not allow your beneficiaries to inherit your fund as a drawdown account. Ian Naismith at Scottish Widows says: “In almost all cases you should take the tax-free cash.” If you don’t it will be counted as taxable. To make sure you can pass on your pension in a tax-efficient manner, there are a few things to do.įirst, take your 25% tax-free cash lump sum before you turn 75. This means beneficiaries can dip into the pension pot they inherit as and when they want. You can nominate anyone to inherit your remaining pension fund as a drawdown account. A charge of 45% will apply if benefits are taken as a lump sum today, although this is due to change in April 2016 when the beneficiary’s marginal rate of income tax will apply. On your 75th birthday your pension assets become taxable, but only at the marginal rate of income tax. This means that wealth built up in a pension can be passed on as inheritance without losing the tax shelter or any tax charge, regardless of whether withdrawals have been made. In broad terms, if you die before the age of 75 your beneficiaries will pay no tax on any pension savings left to them. There is now enormous opportunity to leave some, or all, of your pot to your loved ones in a tax-efficient way. This was scrapped in April as part of the government’s “pensions revolution”, which also marked the end of the requirement for savers to swap life savings to buy an annuity 'High-quality financial advice is vital when constructing such solutions to ensure each customer is comfortable they have the right balance of risk and flexibility that is right for them in order to enjoy the retirement they want,' he added.This is because, although pensions aren’t counted as someone’s estate for inheritance tax purposes, until recently there has been a hefty 55% pensions death tax.

“The idea of mixing annuity and drawdown solutions customised to an individual’s preference is not new, but the recent interest rate changes and stock market volatility has highlighted the importance of considering annuities as a way of underpinning a retirement income.'ĭespite these benefits, Stevens warned that this is not an option a customer can typically navigate on their own. “Blended annuity and drawdown portfolios are a way of balancing the trade-off between controlling a retirement portfolio to benefit from future investment growth while reducing the effects of market volatility. They want to enjoy a certain level of income while retaining control over how they run their retirement funds but at the same time minimising the risk of a market crash causing them to run out of money in retirement. LV= retirement director, David Stevens, stated: “Drawdown customers often want the best of both worlds. The company argued that this approach also offers flexibility to advisers and their clients, as advisers can tailor a retirement portfolio for their clients that produces the required amount of guaranteed income and potential for future growth. However, LV= suggested that a blended retirement portfolio combining a fixed term annuity and a smoothed investment fund could help retirees avoid running out of money in retirement and addresses their concerns about stock market volatility. In addition to this, over a third (37 per cent) of workers with a DC pension said that their preference would be to receive both a set income and have a pot of money to draw from in retirement, increasing to 47 per cent amongst those close to retirement (55-64). The survey also found that over half (54 per cent) of workers with a defined contribution (DC) pension, around 7 million workers, are made anxious by fluctuations in the value of their pension.

#Drawdown pensions how to

Industry experts have suggested that a blended retirement portfolio could ease pensioners' drawdown and volatility fears, after research from LV= found that 58 per cent of working adults, 19 million savers, do not know how to avoid running out of money in retirement.